On January 1, Year 4, Place Inc. acquired an 80 percent interest in Setting Co. for $800,000 cash. At that time, Setting's assets and liabilities had carrying amounts equal to fair values, except for the following: Inventory Undervalued by $75,000 Turns over 6 times a year Planet and equipment Bonds payable Undervalued by $50,000 Overvalued by $40,000 Remaining useful life: 10 years Maturity date: December 31, Year 8. The premium/discount on bonds payable is amortized on a straight-line basis. At January 1, Year 4, Setting had 100,000 common shares outstanding with a carrying amount of $550,000 and retained earnings of $50,000. The abbreviated financial statements of Place and Setting on December 31, Year 6, are as follows: STATEMENTS OF FINANCIAL POSITION Plant and equipment (net) Investment in Setting Current assets: Common shares Place $1,250,000 800,000 Setting $1,555,000 950,000 800,000 $3,000,000 $2,355,000 $1,000,000 $ 550,000 113